Monthly Archives: June 2017

Dealing with lenders that are slow or unresponsive to requests for payoff quotes and lien releases can be one of the most frustrating and obnoxious parts of a real estate transaction. Borrowers have several laws to rely upon to induce and incentivize their lenders to provide payoff statements and lien releases in a timely and reasonable manner.

Texas State Law. Under Section 349.003 of the Texas Finance Code, a person who fails to perform a requirement imposed upon that person by Subtitle B of Title 4 of the Texas Finance Code “is liable to the obligor for an amount that does not exceed an amount computed under one, but not both, of the following:

(1) three times the actual economic loss to the obligor that results from the violation; or

(2) if the violation was material and the violation induced the obligor to enter into a transaction that the obligor would not have entered if the violation had not occurred, twice the interest or time price differential contracted for, charged, or received, not to exceed:

(A) $2,000 in a transaction in which the amount financed does not exceed $5,000; or

(B) $4,000 in a transaction in which the amount financed exceeds $5,000.”

Also, anyone liable under this statute is liable for “reasonable attorney’s fees set by the court.” Tex. Fin. Code § 349.003(b).

Section 343.106 of the Texas Finance Code provides that the Texas Finance Commission shall promulgate rules related to payoff statement requests. The Texas Finance Commission promulgated such rules in Chapter 155 of Part 8 of Title 7 of the Texas Administrative Code.

Under 7 T.A.C. § 155.2, payoff statement requests should be in writing, in accordance with lender designations, and should include, at a minimum, the name of the mortgagor, the physical address of the collateral, and the proposed closing date of the loan. Upon receipt of a proper payoff request, the mortgage servicer must deliver a payoff statement by the “eighth business day after the date the request is received unless federal law requires a shorter response time.” 7 T.A.C. § 155.3.

Actual damages for failure to provide a payoff statement need to be proven up by something more than mere speculation or conjucture and must be arrived at “by reference to some fairly definite standard, established experience, or direct inference from known facts.” Household Fin. Corp. III v. DTND Sierra Invs., LLC, No. 04-13-00033-CV, 2013 Tex. App. LEXIS 13649, at *20 (App.—San Antonio Nov. 6, 2013). This can be a tricky part of getting damages for a wrongful refusal to provide a payoff statement. The owner of property can testify to the value of the owner’s property, but must explain the basis for the owner’s valuation and the basis cannot be speculative or conjectural. Id. at *31.

Federal Law. Under 15 U.S.C. § 1639g, “A creditor or servicer of a home loan shall send an accurate payoff balance within a reasonable time, but in no case more than 7 business days, after the receipt of a written request for such balance from or on behalf of the borrower.” The aggrieved borrower under 15 U.S.C. § 1639g can get damages under 15 U.S.C. § 1640(a)(1)–(3), but not (a)(4). So, actual damages plus statutory damages in the range, and attorney’s fees and court costs, but not “an amount equal to the sum of all finance charges and fees paid by the consumer.”

Title Company Affidavit as Release of Lien. Under Section 12.017 of the Texas Property Code, a title company can, in accord with the statute, file an affidavit as a release of lien if the mortgagee fails to provide a timely release of lien following the provision of a payoff statement that was complied with.

Criminal Law. Under 15 U.S.C. § 1611, anyone who willingly and knowingly fails to provide information that is required to be disclosed “shall be fined not more than $5,000.00 or imprisoned not more than one year, or both.” This is a criminal statute. Getting a federal law enforcement official or prosecutor interested in this is probably not very easy unless the circumstances are extremely egregious.

Under Tex. Penal Code § 32.49, the refusal to release a fraudulent lien, as described by Tex. Gov’t Code § 51.901(c), upon request can be a Class A misdemeanor. Also see Bowles v. State, No. 01-04-00801-CV, 2006 Tex. App. LEXIS 7341, at *2 (App.—Houston [1st Dist.] Aug. 17, 2006).

A fraudulent lien can give rise to civil liability of the greater of $10,000.00 or actual damages, plus court costs, attorney’s fees, and exemplary damages, but refusal or failure to provide a lien release following a payoff may not qualify as a fraudulent lien for purposes of Tex. Civ. Prac. & Rem. Code § 12.002 because the lien was not fraudulent when filed. However, the statute does prohibit making, presenting or “use” of a document with knowledge that the document is a fraudulent lien or claim, so there may be scenarios where the statute could be applicable to the refusal or failure to provide a lien release. Tex. Civ. Prac. & Rem. Code § 12.002.

Refusing to release a lien can also be considered slander of title. Tarrant Bank v. Miller, 833 S.W.2d 666, 667 (Tex. App.—Eastland 1992).

The lender’s failure to provide the payoff statement or release of lien is also going to be a plain old breach of contract claim. The wrongful lien also clouds title, so the borrower could file a suit to quiet title under the declaratory judgment statute and get attorney’s fees for prosecution of a declaratory judgments action.

Suit to Remove Cloud on Title in the Form of Unreleased Lien Not a Trespass to Try Title Suit. Attorney’s fees are not generally available in a trespass to try title case. Trespass to try title cases involve possession of property. Skalak v. Book, No. 03-11-00595-CV, 2012 Tex. App. LEXIS 8226, at *22 (App.—Austin Sep. 26, 2012). Non-possessory suits, like a suit to remove a cloud upon title caused by an unreleased lien, would accordingly likely qualify for recovery of attorney’s fees under the Texas Uniform Declaratory Judgments Act.

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.